If you’ve been following my writing at Profit Confidential, you’d know that I’ve been very bullish on pot stocks for the past year. And while there’s no shortage of fast-growing businesses in the legal cannabis industry, Green Thumb Industries Inc (CNSX:GTII, OTCMKTS:GTBIF) could be one of the best names to consider.
When Green Thumb Industries stock was near the top of its previous trading range in October 2020, I wrote, “this pot company is firing on all cylinders,” and that “I wouldn’t be surprised to see GTBIF stock delivering further returns to its shareholders.”
Since my article was published on October 16, Green Thumb Industries stock has surged by more than 75%.
The best part is, while GTBIF stock has gotten more expensive, the growth in its business has also become stronger.
Green Thumb Industries Stock
Founded in 2014, Green Thumb Industries is a cannabis consumer packaged goods company.
The vertically integrated company manufactures and distributes a portfolio of branded pot products including “Beboe,” “Dogwalkers,” “Dr. Solomon’s,” “incredibles,” “Rhythm,” and “The Feel Collection.” (Source: “Investor Presentation November 2020,” Green Thumb Industries Inc, last accessed January 11, 2021.)
The company currently has 13 manufacturing facilities, licenses for 96 retail locations, and operations across 12 states.
Even though Green Thumb Industries is an American pot company, its stock is listed north of the border on the Canadian Securities Exchange. Still, because the stock also trades over the counter in the U.S., it’s very convenient for American investors to buy and sell its shares.
Pot stocks are quite volatile, but during the COVID-19 pandemic, the industry has demonstrated its resilience.
For instance, in the second quarter of 2020, when many businesses were deep in the doldrums due to the pandemic-induced recession and lockdown orders, Green Thumb Industries managed to grow its total revenue by 16.6% from the first quarter to $119.6 million. (Source: “Green Thumb Industries Reports Second Quarter 2020 Results,” Green Thumb Industries Inc, November 11, 2020.)
The growth momentum got even stronger as the economy began to reopen.
According to its latest earnings report, Green Thumb Industries generated $157.1 million of total revenue in the third quarter of 2020, representing a 31.3% increase compared to its already-impressive second-quarter revenue. (Source: “Green Thumb Industries Reports Revenue of $157.1 Million and Positive Net Income of $9.6 Million or $0.04 Per Share for Third Quarter 2020,” Green Thumb Industries Inc, November 11, 2020.)
Year-over-year, the pot company’s top-line growth rate was a staggering 131.1% in the third quarter.
Growth was across the board. In its consumer packaged goods business, Green Thumb’s gross branded product sales rose 32.6% sequentially, mainly due to expanded product distribution. In the company’s retail business, comparable sales grew by more than 65% (on a base of 25 stores that were open for at least 12 months), driven by higher transaction volume.
And it wasn’t just sales that improved. In the reporting quarter, Green Thumb Industries Inc’s gross margin expanded 220 basis points sequentially to 55.4%. Moreover, the September quarter marked the third consecutive quarter in which the pot company generated positive cash flow from operations.
The most impressive part, at least in my opinion, was the bottom line. In the third quarter of 2020, the company earned net income of $9.6 million, or $0.04 per share—a huge improvement from its year-ago period’s net loss of $14.6 million, or $0.07 per share. This marked the first time Green Thumb Industries delivered positive earnings per share (EPS).
In a nascent industry in which plenty of companies are still burning cash and incurring losses, Green Thumb’s positive cash flow and earnings should provide investors with peace of mind.
Green Thumb Industries Inc (OTCMKTS:GTBIF) Stock Chart
Chart courtesy of StockCharts.com
At the time of this writing, Green Thumb Industries stock is going up with strong momentum. If the ongoing rally becomes a parabolic run, we could see some pullbacks.
However, because Green Thumb Industries Inc’s fundamentals are more than solid, the possible retracement down the road could be an opportunity for investors to get on board the marijuana profit train.